You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

October 7, 2024

Fintech Insights: P2P Lending in Thailand

Subscribe to Updates

Peer-to-peer (P2P) lending has been introduced as an additional option in Thailand’s fintech landscape. This innovative lending model offers new opportunities for both lenders and borrowers, while also presenting unique regulatory challenges. This article explores the current state of P2P lending in Thailand, focusing on the regulatory framework and the requirements for platform providers, borrowers, and lenders.

Regulatory Framework for P2P Lending

In Thailand, P2P lending platforms fall under the purview of Revolutionary Council Decree No. 58, which regulates lending businesses. The Bank of Thailand (BOT) recognizes the potential benefits of P2P lending platforms in providing lenders with new investment opportunities and offering borrowers additional sources of funds.

A “P2P platform provider” is defined as a person who provides an electronic system or network for peer-to-peer lending. To ensure the security and stability of the P2P lending system and provide sufficient protection for platform users, the BOT has established a regulatory framework with specific requirements for P2P lending platforms.

Regulatory Sandbox Requirement

One unique aspect of Thailand’s approach to P2P lending regulation is the requirement for platforms to participate in a regulatory sandbox before applying for a P2P lending platform license. This sandbox approach allows the BOT to closely monitor and assess the operations of P2P platforms in a controlled environment before granting full operational licenses.

Requirements for P2P Platform Providers

To obtain a P2P lending platform license, applicants must meet several criteria, including:

  • The applicant may not be a financial institution.
  • The company must be incorporated in Thailand.
  • A minimum paid-up registered capital of THB 5 million is required.
  • At least 75% of the voting shares sold must be owned by Thai nationals.

These requirements aim to ensure that P2P lending platforms have a significant local presence and adequate capital to operate responsibly.

Regulations for Borrowers and Lenders

The BOT has also established guidelines for both borrowers and lenders participating in P2P lending platforms in order to prevent conflicts of interest, guard against borrowers not having the capacity to repay their loans, and protect individual lenders from overexposure.

Borrowers must be individuals capable of taking on and repaying debts and may not be directors, authorized persons, or major shareholders of the P2P lending platform. Lenders, on the other hand, may not be P2P lending platforms themselves and must pass a client suitability assessment before providing loans. In addition, lenders (excluding institutional investors, joint ventures, venture capital, or certain other specific investors identified by the Capital Market Supervisory Board) are limited to lending THB 500,000 within a 12-month period.

Outlook for P2P Lending in Thailand

The emergence of P2P lending in Thailand presents both opportunities and challenges. It has the potential to improve financial inclusion by providing access to credit for individuals and small businesses that may not qualify for traditional bank loans. For lenders, P2P lending platforms offer a new asset class for investment diversification.

Despite these promising attributes, P2P platforms face a strict regulatory environment, including the unique sandbox requirement. Risk management is also a concern, with platforms needing to develop systems for credit assessment and fraud prevention.

For fintech companies eyeing the Thai P2P lending market, understanding and complying with the regulatory requirements will be key. The future of P2P lending in Thailand may bring further refinement of regulations, and all stakeholders—platform providers, borrowers, lenders, and regulators—will need to adapt accordingly to drive the sector forward.

Related Professionals

Industries

Fintech

Location

RELATED INSIGHTS​ 

December 8, 2023
In a significant development on December 5, 2023, the Central Bank of Myanmar (CBM) issued Letter No. FE-1/2937 granting authorized dealer licensed banks (ADLBs) the authority to freely transact in foreign currency trades, buying and selling at the market exchange rate for Myanmar kyat (MMK) as proposed by buyers and sellers through online trading platforms. Offshore remittances, however, must comply with the remittance criteria set by the Foreign Exchange Supervisory Committee. The online trading platform Refinitiv, initiated in June 2022 under the CBM’s guidance, facilitates the buying and selling of foreign currency between ADLBs and between banks and customers. The initiative was implemented in accordance with CBM Letter No. FE-1/789, dated June 21, 2023. The platform’s inception saw the exchange rate set at over MMK 2,900 per USD 1. Then, in August 2023, the CBM ordered banks and traders to limit foreign exchange transactions to an approved online trading platform, again with the exchange rate fixed at MMK 2,900 per USD 1. Transactions outside of online trading platforms continue to be governed by the exchange rate set by the CBM of 2,100 MMK per USD 1. Conversion Rules for Exporters On December 6, 2023, the CBM issued Notification No. 26/2023 lowering the percentage of Myanmar companies’ export earnings in foreign currency subject to mandatory conversion into MMK from 50% to 35% at the current official exchange rate set by the CBM at USD 1 to MMK 2,100. This mandatory conversion must follow the requirements for mandatory conversion of foreign currency, which remain in effect. For more details on foreign exchange developments, or on any aspect of financial regulations in Myanmar, please contact Tilleke & Gibbins at [email protected].
Read More
December 7, 2023
Thailand’s Securities and Exchange Commission (SEC) has updated its regulations regarding public initial coin offerings (ICOs) that exhibit debt-like or infrastructure-backed characteristics. These new regulations are set to transform the landscape for digital fundraising, ensuring enhanced investor protection and risk mitigation. The introduction of these regulations is a major move toward cultivating a more transparent and secure digital token market in Thailand. It highlights the importance of comprehensive information disclosure and aligning digital-asset fundraising practices with established financial standards. The adjustments require more collaboration between token issuers and ICO portals to comply with the developing regulatory environment. The key features of the new regulations, which took effect on November 16, 2023, are summarized below. Debt-Like ICOs Debt-like digital tokens are digital tokens for which a fixed rate of return is predetermined. The rate does not vary based on the performance of the project or enterprise, but it may be supplemented by extra returns. To ensure that investors have access to adequate and essential information prior to making informed investment decisions, and to evaluate the risk of default by the issuer, the regulation requires disclosure of the project’s creditworthiness and risk assessment factors, as detailed below. Project creditworthiness. Disclosures about project creditworthiness should include information about the credibility assessment of the project, which should be conducted reasonably by an ICO portal or an independent expert. Risk assessment factors. Disclosures should include information about the factors considered in the assessment of risks—particularly the financial capability to repay the investment project’s debt. Infrastructure-Backed ICOs Infrastructure-backed digital tokens are issued for investment in infrastructure assets or to earn a share of the revenue stream from infrastructure projects. The regulations for the ICOs of these infrastructure-backed tokens have been revised to align with those for infrastructure trusts. These regulatory updates cover various aspects: Definition
Read More
November 27, 2023
Thailand’s Electronic Transaction Development Agency (ETDA) has released two new subordinate regulations under the Royal Decree on Digital Platform Services: one detailing the assessment of digital platform services (DPSs) that will be deemed “high-risk” and subject to additional obligations, and another setting guidelines on user verification and authentication for all DPSs. The two subordinate regulations are summarized below. Impact Assessment of DPS Operations Under the Royal Decree on Digital Platform Services, DPS operations that have the risk of seriously impacting financial and commercial security, reliability and credibility of data message systems, or the general public are subject to additional obligations. The first subordinate regulation mentioned above (officially titled Notification of the Electronic Transactions Commission Re: Criteria for Impact Assessment on Operation of Digital Platform Services) outlines the criteria for the ETDA to determine which DPSs are “high-risk.” DPSs falling under this designation include: DPSs whose total value of transactions conducted through the platform in Thailand exceeds THB 100 million (approx. USD 2.8 million) per year; DPSs whose operators have not registered their entities with the Department of Business Development (DBD)—notably overseas operators—and that have 100 or more merchants or business users in Thailand or total users in Thailand between 5 and 10 percent of the country’s population (i.e., approx. 3.3–6.1 million users, calculated using official 2022 figures); DPSs that allow their users to freely post certain messages, or do certain acts, that may affect the public in certain cases, such as: (1) unlawful messages or acts; (2) messages or acts that may affect a child’s rights or people’s fundamental rights; and (3) messages or acts that may negatively affect political opinions of Thai citizens (whether before or after an election) or statements or actions likely to negatively affect other individuals due to gender differences or sexual violence. After considering
Read More
November 17, 2023
On October 3, 2023, Thailand’s Board of Investment (BOI) issued a new regulation clarifying the eligibility criteria for investment promotion under the BOI category “5.10 Development of software, platforms for digital services, or digital content.” To be eligible for BOI promotion under the digital activity category, projects must meet criteria related to local development, minimum investment amount, machinery and equipment, and development processes. These criteria for category 5.10 activities, along with the latest clarifications from the BOI, are detailed in the table below. Tax Incentives The BOI also clarified the method for calculating corporate income tax (CIT) exemptions. The CIT cap amount is calculated on an annual basis from the prescribed expenses incurred after applying for BOI promotion and occurring during the year for which the CIT exemption is claimed. The allowances include 100% of expenses for salaries for newly hired Thai IT personnel, technology-related training, and obtaining quality standards (such as ISO 29110). The revenue of projects that qualify for CIT exemption must be from sales or services directly related to software, platforms for digital services, or digital content developed as promoted by the BOI, including licensing fees, subscription fees, pay-per-use expenses, in-app purchase fees, usage fees, revenue sharing, advertising fees, and so on. For more details on BOI promotion for digital activities, or on any aspect of investment promotion in Thailand, please contact Athistha (Nop) Chitranukroh at [email protected] or +66 2056 5600, Napassorn Lertussavavivat at [email protected] or +66 2056 5662, or Thammapas Chanpanich at [email protected] or +66 2056 5561.
Read More